pseudo market making

I used to do a kind of version of this, but bidding on different strikes than offering and using an option model to delta-hedging. Those days are gone with cancellation costs and penny spreads, it was a real edge, it was really profitable ...
 
Quote from NY0BScalper:

Anyone who does this profitably won't tell you anything. ANYTHING.
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Heh, well, I do pseudo market making, and I know of quite a few other entities doing so (some are well known, some are not). I suppose I can talk abt some generalities. To put it basically, it is exactly "market making" without being designated by the exchanges as a market maker (or specialist), therefore does not have the % of volume requirements. Of cos, reverse is also true, a pseudo market maker does not enjoy the preferred execution that a MM have. Making it harder to just outright capture the bid/ask spread.
 
Quote from virtualmoney:
Is this technique applicable to index futures?
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Buy at bid, sell at ask, wait for reversion to mean?
Maybe for options, but most indices futures are a tick spread apart.
 
Quote from virtualmoney:

Buy at bid, sell at ask, wait for reversion to mean?
Maybe for options, but most indices futures are a tick spread apart.
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It's more complicated than that, if you just wait for reversion to the mean you will get killed. You delta hedge.
pseudo market making only applies to options
 
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